Event Overview

Recently, Wintermute founder Evgeny Gaevoy publicly stated that he would vote against an ARFC governance proposal in the Aave community, sparking widespread discussion in the DeFi space. The core of the proposal attempts to transfer the brand assets and control related to Aave from the existing structure to a governance system led by token holders, thereby more directly binding "brand rights" to the AAVE governance token. The controversy quickly focused on value distribution and market expectations: on one hand, some community members believe that after the brand, front-end, and protocol collaborate, AAVE should achieve clearer value capture in terms of fees, valuation, and premiums; on the other hand, there are voices pointing out that the current settings for revenue structure, risk bearing, and governance boundaries remain highly opaque, and the rights and responsibilities of token holders are not equal. Against the backdrop of Aave as a leading DeFi protocol and the overall crypto market still being relatively weak, this incident not only affects the sentiment of AAVE holders but is also seen as a stress test for the entire DeFi governance landscape and the pricing logic of governance tokens.

Proposal Controversy

According to community discussions and public information, the directional statement of the relevant ARFC proposal is to further on-chain and govern the brand rights, front-end access, and control of some related entities of Aave, allowing more decisions to be made by AAVE token holders through governance processes. However, Evgeny Gaevoy openly opposed it, citing that the proposal "lacks specific explanations on the governance structure and profit model of the front-end/brand entities" in key details, meaning it does not clearly state who will operate, how profits will be made, how profits will be distributed, and who will bear responsibility in case of compliance or technical risks. Supporters' views are mostly centered on: binding brand rights closely with token governance helps enhance AAVE's value capture ability, strengthens the protocol's "decentralization" narrative, and enhances the community's sense of control over the protocol's development in the long term. Opponents emphasize that while the current voting structure is formally governed by token holders, there are significant gaps in information disclosure, entity structure, and legal responsibility definitions. If brand rights are simply handed over to the governance layer, it may lead to token holders bearing disproportionate risks without being informed. This divergence around "who takes the profits and who bears the risks" has become the main axis of the controversy.

Tokens and Brands

In DeFi protocols, on-chain smart contracts, brand front-end websites, and the underlying legal entities typically assume three roles: technical execution, user outreach, and compliance/operational functions, yet their economic and control relationships are often blurred. Governance tokens like AAVE nominally control protocol parameters and treasury decisions, but the brand and front-end are often controlled by specific teams or entities, with revenue flows and risk isolation not fully aligned. This proposal attempts to allow token holders to directly or indirectly control the brand and front-end through "on-chain brand rights," thereby strengthening the value capture logic of governance tokens like AAVE—ideally, the economic activities generated by the protocol and brand premiums can be more directly reflected in the tokens. However, the brand and front-end are also major focal points for regulatory and legal risks, and binding their ownership more closely to token holders may bring requalification risks in compliance, especially as regulatory scrutiny intensifies. Some leading protocols have chosen to delegate front-end operations to independent entities in practice, while governance tokens mainly control on-chain parameters and treasury, achieving a balance between value sharing and risk isolation. In contrast, Aave's proposal is seen as a high-risk attempt regarding this issue of responsibility division.

Governance Game

This controversy reflects the tension between the "ideal type of decentralized governance" in DeFi and the "real-world interest group games." On one hand, the community's vision is for a broadly decentralized group of token holders to determine the key paths of the protocol and brand through open and transparent proposals and voting; on the other hand, actual discourse power often concentrates in the hands of a few large holders, core teams, and professional institutions, who have inherent advantages in designing proposals, crafting narratives, and mobilizing votes. The politicization of governance is specifically manifested in: proposal rhetoric emphasizing "value enhancement" and "decentralization narrative," while limited attention is given to complex issues like entity structure, profit models, and responsibility boundaries; highly asymmetric information, making it difficult for ordinary holders to quickly assess compliance and operational consequences; and different interest parties competing in forums and social media, attempting to shape public opinion that "supporting or opposing represents a certain value stance." If voting is forcibly advanced without clarifying governance mechanisms, brand operation models, and risk isolation, it may lead to decisions made by the majority based on emotions or partial information, creating path dependence on Aave's future technical routes, ecological expansion methods, and even cross-chain/multi-chain layouts. The cost of correcting these paths will sharply increase as the protocol's scale grows, which is also a significant reason why multiple parties, including Wintermute, emphasize "pausing" and "supplementing details."

Market and Regulation

In the recent weak overall crypto market environment, funding is particularly sensitive to the "value capture certainty" of governance tokens: abstract governance rights often struggle to support valuations, and investors are more concerned with clear cash flow paths, fee distribution mechanisms, and risk exposure boundaries. The controversy surrounding Aave's brand rights further reinforces the market's scrutiny of the business models of DeFi governance tokens: will protocol fees flow back to the tokens, and if so, how? Will the brand and front-end become additional profit centers? In the event of regulatory scrutiny or litigation, will token holders be seen as "substantive controllers"? Meanwhile, according to a single source, the number of entries related to blockchain in publicly available SEC documents in the U.S. has surged to about 8,000 (this data still needs further cross-verification), indicating that regulatory attention to the industry continues to intensify. In this broader context, if brand rights are more tightly bound to token holders, it may trigger regulatory requalification of the token's nature and the protocol's structure: shifting from "pure governance tokens" to "suspected equity or regulated securities," increasing uncertainty regarding compliance, disclosure, and even enforcement risks for project parties and holders. Therefore, when evaluating such proposals, the market will not only consider short-term valuations and narratives but will also take long-term regulatory trajectories into account.

Follow-up Observations

The governance controversy surrounding the Aave ARFC proposal provides the industry with a highly concentrated sample: information disclosure, brand structure design, and token economic models cannot be treated in isolation; otherwise, conflicts will inevitably arise when it comes to value distribution and responsibility attribution. Observations on Aave's subsequent governance evolution can focus on several aspects: first, whether the structure and ownership/control disclosures of front-end and brand-related entities become more transparent; second, how the protocol fees and potential revenues from the brand will be distributed among the treasury, operational entities, and AAVE holders; third, whether clearer risk isolation schemes will be introduced to avoid placing all legal and regulatory risks solely on the abstract group of "token holders." For investors and users intending to participate in governance, a more prudent approach is to focus on the transparency of the governance process, arrangements for brand control, and the evolution of the regulatory environment, rather than making decisions based solely on short-term price fluctuations or emotional drives. Current rumors about "AAVE price dropping more than 10% in a single day" and "certain core figures buying large amounts of AAVE before the vote" remain unverified and lack reliable data support. When making investment and governance decisions, it is advisable to base them on verifiable data and clear mechanism designs rather than unverified information.

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